After many years of studying wealth and poverty, I have come to the conclusion that poverty as an adult, is a mental state. I like to refer to it as Poverty Thinking.
Poverty is the byproduct of either absentee parenting or Poverty Thinking.
Both are the primary causes of poverty.
Absentee Parenting is the result of parents not able to raise their children, for various reasons: incarceration, drug addiction, health issues, disability, death or abandonment. In these households, children become the dependents of society, other family members or foster parents.
Poverty Thinking is the result of parents infecting their children with certain ideologies/beliefs that contribute to poverty.
The focus of this article is on Poverty Thinking.
What are some of the ideologies/beliefs that cause Poverty Thinking?
- Victim Mindset – The belief that your financial circumstances are dictated by forces outside your control: Wall Street, rich people intent on keeping you poor, government policies, the economy, bad schools, growing up in a bad neighborhood, bad luck, etc.
- Closed-Minded – Being closed-minded means you are unwilling to embrace new ideas, new thinking or opinions that differ from your own. One of the hallmarks of the self-made millionaires in my Rich Habits Study was their ability to keep their minds open to new ideas, new knowledge and new ways of thinking.
- Ideological Constraints – Holding on to ideologies that keep you from growing out of your poverty: rich people are bad, money is the root of all evil, poor people can’t escape poverty, needing a college education to escape poverty, etc. The ability to cast aside your ideological constraints, allows you to expand your thinking, to grow and to evolve.
- Low Self-Confidence – The belief that you are not smart enough to grow learn anything new. We are all born with the capacity to learn; to gain knowledge or skills. What keeps any poor person from learning new knowledge or skills, is the belief that they don’t have the requisite intelligence to rise above their financial circumstances in life.
- Luck Creates Wealth – The belief that wealth is a byproduct of random luck. This is one reason why the largest demographic who play the lottery, happen to be poor people.
Escaping poverty and creating wealth takes time. How much time, depends on the path to wealth you decide to pursue.
According to my Study, there are four paths to wealth:
- Saver-Investor Path – Saving your way to wealth. Requires saving 20% or more of your net pay and prudently investing it. This path takes an average of 32 years.
- Big Company Climber Path – Climbing the ladder within a big company. This path takes an average of 21 years.
- Virtuoso Path – Top experts within an industry. This path takes an average of 20 years.
- Entrepreneur – Taking a risk in pursuit of a dream. This path takes an average of 12 years.
The best, or most viable paths to wealth for poor people are the Saver-investor Path or the Entrepreneur Path.
For poor people to break out of poverty via the Saver-investor route, poor people would need to save at least 10% of their net income, which may or may not be possible.
For Entrepreneurs, all a poor person needs is a dream they are passionate about. While working capital becomes a factor eventually, investing your time in the pursuit of a dream, is how most entrepreneurs rise out of poverty or the middle-class.
Big Company Climbers most often must secure, at a minimum, a college degree. In order for a poor person to pursue this path, they would likely need to incur debt in order pay for college.
For Virtuosos, this often requires one of two things:
- Advanced Degrees – PhDs, medical degrees, law degrees, masters degrees, etc. or some mad skill that If you are poor, you would likely need to incur significant debt in order to obtain these advanced degrees.
- Exceptional Skills – Possessing some Innate Talent and then devoting your life to maintaining and growing your talent/skills. This often requires a significant investment in time and, in many cases, the need for mentorship or coaching, which can cost money.